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Reliance Worldwide Corporation Limited (ASX:RWC): Is It A Smart Long Term Opportunity?

Simply Wall St

As Reliance Worldwide Corporation Limited (ASX:RWC) announced its earnings release on 30 June 2019, analysts seem cautiously optimistic, with profits predicted to increase by 23% next year, though this is relatively lower than the historical 5-year average earnings growth of 32%. With trailing-twelve-month net income at current levels of AU$133m, we should see this rise to AU$163m in 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Reliance Worldwide in the longer term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

View our latest analysis for Reliance Worldwide

How will Reliance Worldwide perform in the near future?

The longer term view from the 8 analysts covering RWC is one of positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To understand the overall trajectory of RWC's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

ASX:RWC Past and Future Earnings, August 27th 2019

This results in an annual growth rate of 15% based on the most recent earnings level of AU$133m to the final forecast of AU$206m by 2022. EPS reaches A$0.26 in the final year of forecast compared to the current A$0.17 EPS today. With a current profit margin of 12%, this movement will result in a margin of 15% by 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Reliance Worldwide, I've compiled three essential factors you should further research:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Reliance Worldwide worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Reliance Worldwide is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Reliance Worldwide? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.